MAP22, the earlier margin acceleration plan, was put in place to drive improvement in EBITDA margin over three years to at least 20% by FY22. Obviously, this took no account of the impact of the pandemic on the business and the economy, and the initiative has now been reframed with the time horizon pushed out a year to FY23.
The key targets are now to deliver:
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revenue of at least £45m in FY23; and
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an EBITDA margin of at least 23% for FY23.
This requires a CAGR of 11.8% from the guidance of at least £32m revenue for FY20e and a doubling of EBITDA margin from the forecast 11.5% in FY20.
The underlying objective is unchanged: to deliver against Centaur’s financial targets through profitable, organic revenue growth. MAP22 also sought (and achieved) enhanced cost efficiencies. It included the following objectives:
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Cross-selling Xeim’s suite of products and services to enterprise clients.
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Making operational improvements at Econsultancy (this originally encompassed MarketMakers, but this business was closed as COVID-19 took hold and its route to sustainable profitability was compromised).
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Launching new products at The Lawyer to enhance digital subscription growth.
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Taking advantage of its common technology stack, a recent investment, to build new content offerings.
The theme within MAP22 of driving revenues from Influencer Intelligence, Mini-MBA and other eLearning courses, Festival of Marketing, Econsultancy and The Lawyer has been refined. With the exception of Festival of Marketing, these other properties have been identified as the group’s Flagship 4, which will benefit from prioritisation of investment and resource.
The rest of the portfolio will continue to play an important role, particularly in facilitating the cross-and up-sell across the range of the group’s expertise.
The Xeim brands are as shown in Exhibit 3, above. Three are identified as Flagship brands: Econsultancy, Influencer Intelligence and the Mini-MBA. We estimate these business areas represented around 60% of segmental revenues in FY20 and we discuss them in greater detail below.
Econsultancy (we estimate around 19% of the group’s expected continuing FY20 revenues) has two key service offerings: insight and learning. The platform helps its users to enhance the performance of their marketing and ecommerce propositions through digital marketing transformation. This is delivered online as training, insight and essential information to stay up to date in a fast-changing landscape.
The premium content may be provided on a traditional consultancy basis, typically to major brands but increasingly on a subscription basis, incorporating business information and analytics. Most content is now behind a paywall. Although digital transformation has been in progress amongst the potential and existing client base for many years, the process is never complete and one-off projects can and do morph into long-term working relationships. While subscriptions are lower value, the value is considerably higher in margins, with content created once and used multiple times. Management believes it deals with 55 of the largest UK spenders on digital marketing.
Econsultancy also offers digital learning content, built into courses and available as one-off modules. While traditionally this was offered on a face-to-face basis, COVID-19 has encouraged the development of online options, with the future likely to be one of blended learning.
Historically, Econsultancy sold its training and consultancy services separately from its subscription offering. A revised marketing approach is putting subscriptions at the heart of a combined offering, which should help lift volumes, with cross- and up-sells to existing clients and a more coherent proposition for potential customers.
Influencer Intelligence (we estimate c 10% of FY20 revenues) has established itself as a market-leading source of trusted information and analytics for brands looking to harness the power of global influencers and talent. Revenues grew 11% in 2019, although we would anticipate it may have been a more difficult market in FY20 as the pandemic took hold and brands’ marketing strategies were reappraised. The influencer market is a relatively recent phenomenon and pricing structures are yet to formalise. However, it is gaining traction quickly and management states Mediakix has valued the market at $15bn by FY22. A small number of influencers now command very high fees and value is difficult to assess. Centaur’s database currently covers around 120k individual influencers and the intention is to scale considerably, adding another 250k.
The product is sold on subscription to brands and to agencies. The additional scale, alongside the analytics, should enable subscription pricing to build.
Mini-MBA (we estimate c 16% of FY20 revenues) was set up as an offering of Marketing Week, along with its columnist and high-profile industry figure, Mark Ritson, in 2016 and has since taken on a life of its own. It sells courses in marketing and, since 2019, brand management. While the qualification is not independently accredited, it is increasingly cited by marketing professionals in their resumes. Customers include familiar global names in the technology and FMCG sectors.
With online delivery and a move to a new operating platform, the proposition is increasingly scalable, with the opportunity to increase the number of cohorts each year. The marketing effort is now being stepped up, using the experience gleaned from ecommerce in other parts of the group. Professor Mark Ritson continues to be the ‘face’ of the Mini-MBA. He has a high profile in the industry for keynote speaking and thought leadership, having taught marketing on MBA programmes and has a financial interest in the ongoing success of the programme, although the IP rests with Centaur. There is considerable opportunity to extend the programme geographically – particularly in the US.
The remaining brands within the portfolio have been retained because they are of genuine value to the group. Oystercatchers, previously reported within Econsultancy, is a consultancy bought in 2016 that assists clients with the pitch process between client and agency. This gives the group a strong entrée into new clients, which can then be introduced to the other group services. Really was kept when MarketMakers was sold and is now run (remotely for the time being) from the main group offices. Its business model is about curating leads to drive return on marketing investment – a service inherently useful inside the group and to third parties. Festival of Marketing has had to reinvent itself to suit the altered circumstances but has good traction with sponsors and audiences. Its efforts are now focused on building greater year-round engagement with its stakeholders. Marketing Week, Fashion & Beauty Monitor, Design Week and Creative Review are all strong brands within their verticals, driven by relevant and engaging content.